Business Theory Relationship Between Stakeholders, Research Paper

Length: 15 pages Sources: 15 Subject: Business Type: Research Paper Paper: #83369807 Related Topics: Business English, Stakeholders, Business Communication, Business Model
Excerpt from Research Paper :

As the proceedings of the past few years have shown, these labors, regrettably, have not prevented companies from engaging in unethical behaviors that lead to larger corporate disgraces. As a result there is augmented force to make accessible more structured power and ethics programs so that companies are more accountable to the societies in which they function.

Understanding the setting of business ethics can be very difficult. The field is vast, often encircling such concerns as corporate governance, reputation management, precise accounting, fair labor practices and environmental stewardship. In fact, the field addresses the complete range of responsibilities that a company has to each of its stakeholders like those who have a vested interest in the judgments and actions of a company, like clients, workers, shareholders, suppliers and the society. Depending upon the company in question, one may even be able to distinguish additional stakeholders. The field of business ethics is further convoluted by the fact that many terms exist to refer to corporate offices and programs intended to communicate, watch, and implement a company's values and standards (Jo & Harjoto, 2011). In theory, one can make some coarse distinctions among the various domains related to business ethics, like corporate responsibility, social responsibility and corporate compliance. In practice, though, such differences blur because corporate offices of compliance established in the past may now function similarly to offices of corporate and social responsibility (Hurst, 2004).

Not only do business have to worry about how they ethically behave they have to worry about their corporate social responsibility as well. The rising expectations of responsible business behavior results in a growing dispute about the degree to which organizations are accountable for the negative impacts related to their doing business. Although this debate has been around for a long time it wasn't until the 1970's that a trend towards eco competence stimulated companies to reduce their environmental impacts. In the 1980's and 1990's, next to environmental issues, social issues began to receive increasing public concentration (Maas, 2009). In response to the demand to take responsibility for their effects on society, companies plan to progress their impact by investing in stakeholder satisfaction and by preventing or solving environmental and social troubles.

According to Maas (2009) the interest of organizations to progress their impact on society is not sector specific. In corporate boardrooms managers are more and more being asked to explain, their impacts on the natural environment or the local economy. These trends involve organizations need to improve the management of their environmental and social impacts, as it advocates companies to assess their impact across the environmental, social and economic measurement. In an ideal world, social impact should be incorporated into management decisions and corporate strategy.

The result of the actions taken by companies in order to develop their impact on society is what is understood by Corporate Social Performance (CSP). Conventional performance measurement is frequently based on the supposed goal-attainment approach and does characteristically not consider social or environmental questions. The hypothesis that underlies the goal-attainment approach is that the goals of a company are identifiable and unmistakable (Maas, 2009). A companies' competence is represented by the accomplishment or progress towards these organizational goals. Attaining organizational goals such as increasing production, growing profit or dropping costs, can be researched by using conventional performance measurement methods. Including impact upon the society on a variety of dimensions, economic, environmental, and social, into performance measurement complicates the capability to recognize, measure and value these impacts. On the other hand, it adds to the wholeness of the performance measurement. Mostly environmental and social impacts are not articulated by the market, as they do not have a market value and are therefore often fundamentally ignored by companies.

A new imperative that businesses must think about is best described as global corporate citizenship. "This is the belief that companies not only must be engaged with their stakeholders but are themselves stakeholders alongside governments and civil society. International business leaders must fully commit to


For the reason that these global issues increasingly impact business, not to connect with them can hurt the bottom line. Because global citizenship is in a corporation's enlightened self-interest, it is sustainable. Addressing global issues can be good both for the company and for society at a time of increasing globalization and diminishing government influence.

The case for corporate engagement in society is compelling, and business leaders must look cautiously at how their companies are engaged, consider what more they can do, and act. Businesses often miss the true benefits of an incorporated strategy for effective corporate engagement. Sharpening definitions of the concept of corporate engagement is vital to making the business sector understand and practice it better (Schwab, 2008). Clarification is also important to make sure that the general public better appreciates the complex challenge company's face and can assess how successfully or not they address them.

"There are five core concepts - corporate governance, corporate philanthropy, corporate social responsibility, corporate social entrepreneurship, and global corporate citizenship that define the dissimilar types of business engagement" (Schwab, 2008). Corporate governance is more than the manner in which a company is run. It means that a company complies with local and international laws, clearness and accountability necessities, ethical norms, and environmental and social codes of conduct. Every company is subject to some demonstration of authority; or else, it would not have the fundamental license to do business. The main issue is the quality of this governance. A company either abides by or does not abide by the laws and standards that apply to it. Good corporate governance means that the company's behavior meets or exceeds what is necessary on paper, not doing any damage because it is following the rules and possibly even doing good by going beyond the mandated minimum. Corporate governance is how a company acts when nobody is watching. Without good corporate governance, no other form of corporate commitment is believable.

A key part of corporate governance is the growth and implementation of internal programs to support ethics, moral standards, and socially acceptable practices (Schwab, 2008). These should include admiration for human rights and observance of labor standards, as well as internal efforts to prevent corruption and dishonesty. This can be predominantly difficult for companies in jurisdictions where the rule of law is weak and what is adequate may not be clear. Many companies now publish standards of business conduct that direct their decision-making and set the parameters for their professional relationships worldwide.

According to Schwab (2008) good corporate governance should not be seen as only a fulfillment issue. Companies should be vigorously concerned in the development of standards and practices, acclimatizing them constantly to the requirements of global markets and public expectations. New areas calling for tighter governance rules include managerial compensation and the clearness of new financial instruments such as hedge funds and private equity funds.

Companies are expected to manage sensibly an extended web of stakeholder interests across more and more permeable organization boundaries and recognize a duty of care towards traditional interest groups as well as silent stakeholders, such as local communities and the environment (Jamali, 2008). It has been suggested that the needs of shareholders cannot be met without fulfilling to some amount the needs of other stakeholders. In other words, even when a company seeks to serve its shareholders as a main concern, its attainment in doing so is likely to be affected by other stakeholders. Some even argue that a comprehensive stakeholder approach makes commercial sense, permitting a firm to make the most of shareholder wealth, while also increasing total value added.

Corporations today cannot operate unaided, but are connected to complex multi-stakeholder networks in society. Stakeholders are individuals or groups who have some kind of stake in or relationship with a corporation; this can be one of support, authority on or being influenced by the corporation in some way. The stakeholder concept is related to the resource dependence theory as well as the institutional theory and how its stakeholders recognize a corporation will influence their behavior toward it for better or worse. Stakeholder pressure drives businesses towards levels of sustainable performance beyond legal compliance, which is also the objective of corporate environmental management (CEM) (Paloviita & Luoma-aho, 2010). The corporate environment necessitates a more strategic approach than mere reporting. It entails the idea that societal needs should be discussed through a dialogue between corporations, government policy-makers and public interest groups. Too often, though, corporations are taking a reactive approach after the urgency in environmental issues has already appeared by a certain stakeholder group.

Stakeholder management is based on the idea of the displacement of politics whereby private managers are absorbed into a political arena. More than in the past, managers nowadays operate in a societal field of influence without being able to hide behind the government. The manager needs to…

Sources Used in Documents:


Baker, M. (2004). Corporate social responsibility - What does it mean? Retreived from

Carroll, A.B. (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral

Management of Organizational Stakeholders, Business Horizons, (July-August).

Cline, A. (2005). Harry Potter and Popular Culture. Retrieved from
Corporate social responsibility -- Towards a sustainable future. (2009). Retrieved from
D'Amato, A., Henderson, S. & Florence, S. (2009). Corporate social responsibility and sustainable business. Retrieved from
Comparing European Business Practices to those in the United States. Retrieved from
Maas, K. (2009). Corporate social performance: From output measurement to impact measurement. Retrieved from rce=web&cd=9&ved=0CHgQFjAI&

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